Axogen, Inc. Q1 FY2025 earnings call

• Leadership transition: Nir Naor steps down as CFO, Lindsey Hartley to assume role May 12th, with Nir remaining as advisor until July 1, 2025. - Q1 revenue growth driven by adoption of Axogen's nerve repair algorithm across target markets. - Progress in high-potential accounts, commercial infrastructure expansion, and professional education initiatives. - Clinical research progress: breast working on Level 1 study protocol design, extremities on track for Level 1 study design, oral maxillofacial on track for clinical evidence plan by year-end. - 8 new peer-reviewed publications supporting Axogen's technologies. - Progress across innovation pillars: therapeutic reconstruction, easy coaptation, and protection expansion initiatives. - BLA for Avance Nerve Graft on track, with mid-cycle meeting with FDA and late-cycle meeting scheduled.

Revenue in the first quarter increased to $48.6 million, up 17.4% compared to the previous year. Growth was broad-based across all markets. For high-potential accounts, there were 566 active accounts in Q1, an increase of 5% versus Q1 2024, and average account productivity rose 24% vs a plan of 21% with ~780 identified high-potential accounts. In extremities, there was double-digit growth, with plans to add five additional sales representatives in high-potential territories by Q3, and a Upper Extremity Professional Education Fellows Program involving 30 surgeons completed. Breast saw double-digit growth in new customer creation, with plans to expand the sales team from 12 to 22 sales specialists by Q3, having initiated recruitment, and executed two professional education programs training 35 surgeon pairs. In Oral & Maxillofacial and Head & Neck, there was strong momentum, with hiring started for five field-based market development managers. For prostate, the clinical pilot was on track with 3 confirmed sites and advanced discussions with others, and plans to have 10 pilot sites by year-end.

• Maintain full-year 2025 revenue growth guidance in the range of 15% to 17%. - Full-year 2025 gross margin expected to be in the range of 73% to 75%, including ~$2M one-off costs related to BLA approval around September. - Expect to be cash flow positive for the entire year and self-fund the new strategic plan with cash from operations.

• Uncertainties in the BLA approval process and its impact on operations. - Potential delays in hiring and training for commercial infrastructure, particularly in the breast segment. - Risks associated with clinical trial enrollments and timelines for studies.

Q: About Avance BLA approval and customer accounts, specifically if accounts need recertification, A: Jens Kemp responds there are no major changes to ordering, shipment, storage, or reimbursement; reimbursement pathway remains unchanged using CPT code 64912.

Q: On gross margin and process improvements, A: Nir Naor and Michael Dale discuss one-off BLA costs and expectation of gross margin improvement post-BLA approval.

Q: Regarding sales team count and cadence of operating expenses, A: Michael Dale mentions net 20 salespeople expected by year-end, and OpEx expected to grow gradually pursuant to strategic plan.

Q: About high-potential accounts and clinical data, A: Michael Dale explains a mix of active high-potential accounts and opportunities to expand presence in existing and new high-potential accounts.

Q: On breast hiring delay and prostate pilot, A: Michael Dale states breast hiring will catch up by end of second quarter, and prostate pilot is not revenue-driving yet but on track.

Q: Concerning reimbursement and OMF growth, A: Rick Ditto talks about tackling regional non-coverage policies for Avance, and Jens Kemp mentions mandible reconstruction as a primary growth driver in OMF.

Q: On gross margin and account focus, A: Michael Dale explains resource allocation towards high-potential accounts and its impact on business.

Q: About business growth rates and breast surgeons, A: Michael Dale states there's still significant opportunity for growth in existing breast programs with new surgeons.

Q: On BLA process checkpoints, A: Michael Dale mentions timely answering IR requests and the importance of the late-cycle meeting with FDA.